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Concurrent Causation and Your Insurance Policy

April 7, 2014

Insurance Policy
What is concurrent causation in property insurance and why should you care? To sum up this longer definition from IRMI, concurrent causation in property insurance is when covered and uncovered perils occur either at the same time or in sequence and result in a loss.

To use a real life example, in a famous case in California (Premier Ins. Co. v. Welch, 189 Cal. Rptr. 657, [Cal. App.])heavy rains contributed to a mudslide that knocked an insured’s home off of its foundation. Upon investigating the claim, it was found that human error in the construction of the home caused inadequate drainage, which contributed to the home moving off of its foundation. Because the buildup of water beneath the home was a covered cause of loss but the earth movement from the hillside above was not a covered cause of loss, a judge ruled this as concurrent causation and Welch won the case.

Because of concurrent causation lawsuits in the 1980s, like the one above, the industry moved away from all-risk policies in favor of policies that better defined covered and non-covered perils. One of the most notable was the change from “all risk” peril policy language and the adoption of “open perils” language instead. Any peril not specifically excluded from an “all risk” policy was therefore covered, and while the same rule basically still applies, “open peril” was adopted as a more neutral phrase. The other significant change was the adoption of anti-concurrent causation (ACC) language in insurance policies. Some states do allow ACC language in their policies, so it’s important for those doing business in multiple states to be aware of what language is approved and where.

Keep in mind that as an agent or company doing business in Washington, this state does allow ACC policy language. Three court cases (Graham v. Pemco, 98 Wn.2d 533; Villella v. Pemco, 106 Wn.2d 806; and Safeco v. Hirschmann, 112 Wn.2d 621) are typically cited as the reason why. Exceptions for this language can be found in Boiler & Machinery, Farm, Businessowners, Capital Assets, Commercial Property, and Commercial and Personal Inland Marine line of business forms.

So why should you care? Concurrent causation and ACC language in a policy can make a huge difference in how a group of perils causing a loss is covered. Landslides may not be covered under earth movement, but as we saw in the case at the start, a concurrent loss caused by human error during construction can still result in coverage.

If you’re curious what your business or homeowners policy may cover, we urge you to contact your insurance agent. We’ve mentioned before that you should consult them as you would your doctor or attorney, and the ins and outs of coverage is no exception! Insurance is not always simple, but agents are trained and should always be there to help you out!

 

For further reading on how policy forms have changed and their effect on concurrent causation (and building collapse), check out this article from Adjusters International.

Article by Kristen Skinner

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